Speaker 1: Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. So
Speaker 1: the good news for Prime Minister Boris Johnson is that
Speaker 1: some people believe he might have enough votes for his deal.
Speaker 1: The bad news for the Prime Minister today is that
Speaker 1: hardly anybody knows when Parliament might actually get to vote
Speaker 1: on it. Johnny guests now from London is Edward Evans,
Speaker 1: Bloomberg Managing editor in charge of Brexit. Quite a job, ed,
Speaker 1: So let's talk about it. What happened this past weekend
Speaker 1: and what's the sequencing of events over the next couple
Speaker 1: of days. Parliament on Saturday rejected the deal that Johnson
Speaker 1: struck with Brussels. He will try and put it again
Speaker 1: Parliament today, but in doing so he risks a clash
Speaker 1: with Speaker John Burko. There's a convention in the British
Speaker 1: Parliament that once Parliament has voted on something, you can't
Speaker 1: put it to Parliament again. Nevertheless, the government is going
Speaker 1: to put forward the what's called the Withdrawal Agreement Bill.
Speaker 1: This is the actual piece of legislation that implements breaks
Speaker 1: it to Parliament this week and the idea is to
Speaker 1: get that through the whole of Parliament by October thirty one. Now,
Speaker 1: the problem for Johnson is going to be whether he
Speaker 1: can get both either of those pieces of the legislation through,
Speaker 1: but will probably with the second, whether it's going to
Speaker 1: be subjected to amendments by his opponents. What do we
Speaker 1: know about the numbers at the moment and how they've
Speaker 1: changed since this past weekend. Well, the numbers are very
Speaker 1: very close. It has to be stressed. To get his
Speaker 1: deal over the line, Johnson needs to get sixty one
Speaker 1: waiverers to fall in line behind. Now on our estimates,
Speaker 1: we think he's got sixty two. Foreign sectually dominant RAB
Speaker 1: over the weekend is saying that the government thinks it
Speaker 1: has the numbers to do it. But you'd expect a
Speaker 1: government in to say that. How often do you hear
Speaker 1: a government in US to say they expect to lose
Speaker 1: a piece of legislation in Westminster? I think the only
Speaker 1: safe answer is that it's going to be very very
Speaker 1: close and we're in for ten days of intense parliamentary
Speaker 1: credit warfare. Here. A lot of rumors over the last
Speaker 1: couple of days about the DUP, the Democratic Universt Party
Speaker 1: and what they'll be pushing for in the next four
Speaker 1: hours eight hours and whether they'll team up with Labor
Speaker 1: at what do we know about that? Yeah, this is
Speaker 1: a DP. They rejected Boris Johnson's initial deal. Their argument
Speaker 1: they do not want to see Northern Ireland treated differently
Speaker 1: to the rest of the UK. Now Johnson has because
Speaker 1: he wants to leave the EU customs you need. He
Speaker 1: that Ireland is dead opposed to that idea, so he
Speaker 1: has had to fudge a Northern Ireland status essentially like
Speaker 1: the UK will leave the customs you do, but it
Speaker 1: will be forced to follow some new customs rules. Now
Speaker 1: do you teem in? MPP says that the government party
Speaker 1: meeting with with to discuss potential amendments to the government's legislation,
Speaker 1: but he's ruled out back in any need to keep
Speaker 1: the UK in the European Union's customs unit. That's something
Speaker 1: that Labor has been looking to do. Ever very quickly here,
Speaker 1: we're gonna we're gonna do a ballet here and I'm
Speaker 1: beginning to your discussion of November there will be a
Speaker 1: general election. Who wants a general election right now? Boris
Speaker 1: Johnson in short? In short, but nobody else but Johnson.
Speaker 1: It's it's the way that he can get this through,
Speaker 1: go to the country, get a majority in parliament that
Speaker 1: allows him to his Brexit deal through um. Everybody else
Speaker 1: is very much more ambivalent about it, Labor. If you
Speaker 1: look at where they're Poland, Corpin is no real in
Speaker 1: no real position to go to the country. His party
Speaker 1: is divided on Brexit and he resisted any chance to
Speaker 1: do that. To do that so far Everard Evans, thank you.
Speaker 1: Something really should say in working truly there's a cliche,
Speaker 1: but they are ye. Let us continue this discussion. Maybe
Speaker 1: brought it up. Meredith Sumter with us with your Asia group.
Speaker 1: It was a joy to have Ian Bremer with us
Speaker 1: last week, and we're raving about Meredith Sumpter's abilities not
Speaker 1: only on Asia and on China, but really with a
Speaker 1: holistic view for your Asia group. She joins us from
Speaker 1: our studios in Washington. Uh, Meredith on on China right now,
Speaker 1: what is the mood that you've seen within the Chinese media,
Speaker 1: the Chinese speaking media. The Chinese speaking media is really
Speaker 1: of of two minds. One, they are messaging constructively about
Speaker 1: the interim deal that has been reached in principle with
Speaker 1: the United States, and all eyes are on some kind
Speaker 1: of arrangement being agreed to ahead of the APEC meeting
Speaker 1: where Presidents She and Trump will meet UH and signed
Speaker 1: the agreement. On the other hand, they're also messaging calm
Speaker 1: UH and a medium to long term view of how
Speaker 1: they're managing the economy. So we've seen a lot of
Speaker 1: hyperventilation in the markets about China being at six percent growth.
Speaker 1: This is this is something that look, you know, Chinese
Speaker 1: contact on me. Look, we've been actually been below six
Speaker 1: percent growth for some time. Nudge nudge, right, So they're
Speaker 1: they're looking to just manage those expectations that higher quality
Speaker 1: growth means a lower growth rate for China, and look
Speaker 1: that with the trade confrontation going on, of course you're
Speaker 1: going to see a downward pressure on their growth. I
Speaker 1: want to bring what you just said with your your
Speaker 1: core expertise on Asia over to Brexit, because it's the
Speaker 1: same thing they're managing. The chaotic message in the United
Speaker 1: Kingdom is well, do you just assume damp and growth
Speaker 1: in the United Kingdom for the same reasons, frankly as China,
Speaker 1: which is just a certain level of chaos the UK
Speaker 1: economy is. They're going to have the government's going to
Speaker 1: have to find some white Look like all the focus
Speaker 1: has been on Yal or new deal. We're gonna get
Speaker 1: this through. And as soon as this gets wrapped, then
Speaker 1: I think you're going to see Westminster focusing on, oh
Speaker 1: my goodness, now what do we have to do? And
Speaker 1: not just on the economic front, like look, negotiating trade
Speaker 1: agreements takes time, but also they're going to have an
Speaker 1: eye towards Northern Ireland and towards Scotland as well to
Speaker 1: think about what are the medium to long term effects
Speaker 1: of all political effects of leaving leaving the European Union
Speaker 1: on those two important parts. And jump in here because
Speaker 1: with all this going on with burkau at to thirty,
Speaker 1: there's a court ruling in Scotland basically out of nowhere.
Speaker 1: I mean, Meredith, are we gonna end up talking about
Speaker 1: Scotland having an independent vote leave the United Kingdom? I
Speaker 1: do think momentum is heading that direction, but listen, I
Speaker 1: want to give you a quick update on what the
Speaker 1: Eurasia Group call is. It has been this way since
Speaker 1: actually um Saturday, and that in lifting the threat of
Speaker 1: a no deal, Oliver Letwin, who will now vote for
Speaker 1: the agreement very well be remembered. Is the man who
Speaker 1: paved the way for deal approval. Now, why do we
Speaker 1: say that in our call is we think that Boris
Speaker 1: is within touching distance of getting the majority that he needs.
Speaker 1: So for those MPs who wanted to take no Deal
Speaker 1: off the table, we think that they will now be
Speaker 1: more ready to vote for a deal. This includes seventeen
Speaker 1: former Tories who lost whip for back in the Band Act.
Speaker 1: Same for the labor backbenchers that the government has now
Speaker 1: been willing, we think that Boris needs an additional five
Speaker 1: to six more labor votes to get to the number
Speaker 1: that he needs. Meredith. What is lost on a lot
Speaker 1: of people is that this is not the beginning of
Speaker 1: the end. This is the end of the beginning. This
Speaker 1: is going to go on for a whole lot longer.
Speaker 1: Even once this deal passes, we then need to negotiate
Speaker 1: with Europe what the future relationship looks like. Meredith. How
Speaker 1: much longer is this going to go on for It
Speaker 1: could take a couple of years, frankly, and during that
Speaker 1: period of time, you know you're gonna have a year
Speaker 1: of transition and the governments on both sides will be
Speaker 1: trying to figure out a way to mitigate the negative
Speaker 1: effects of the UK leaving while also they're preparing their
Speaker 1: populations for what comes next. And this is not just
Speaker 1: trade and investment, but it's also workforce issues. People are
Speaker 1: going to be dislocated and we'll have to make plans
Speaker 1: for their future. So you're gonna see all this attention
Speaker 1: that we've had on are we going to get this
Speaker 1: deal passed? It's now going to be turned to now
Speaker 1: to what do we do to move forward at a
Speaker 1: time when the year Zone growth is slowing and there's
Speaker 1: concerns about the political will of country governments to do
Speaker 1: the fiscal stimulus necessary to keep these key economies out
Speaker 1: of recession. Meredith, thank you so much, too, Short group
Speaker 1: with us today, greatly appreciate the perspective there on England.
Speaker 1: One of our most popular guest darks the door, Charles Cancer,
Speaker 1: is a Newberger Berman looking at along Short always gives
Speaker 1: us good spirit. On the UH, the equity markets you
Speaker 1: mentioned earlier to me, Charles, the idea that the gloom
Speaker 1: out there is tangible give us the level of gloom
Speaker 1: that you see right now. I think gloom in the
Speaker 1: equity market UM. Despite ten years of excess returns for
Speaker 1: both equities and credit, gloom is ubiquitous. I think you
Speaker 1: see it in valuations. You see it in the record
Speaker 1: amount of cash that flowed into money market funds the
Speaker 1: last six months. I think it's about three billion dollars,
Speaker 1: which is similar to what you saw in two thousand
Speaker 1: and eight. So there's there's no lack of worry UM
Speaker 1: in the stock market, whether it be global manufacturing recession,
Speaker 1: slow in earnings, impeachment, Trump, brexit, pick your poison. UM.
Speaker 1: I think. I think it's not lost on on equity
Speaker 1: valuations UM in general, and I would say UM because
Speaker 1: of that, for anyone that has an investment time arising
Speaker 1: that can be measured in five and ten years UM,
Speaker 1: I would just urge folks to stay the course because
Speaker 1: I think the next five to ten years will produce
Speaker 1: UM at minimum average equity like returns, which will more
Speaker 1: than likely get the job done for most. Well, let's
Speaker 1: talk about the risk reward proposition going into next year,
Speaker 1: the low single digits, low single digit profit row? Does
Speaker 1: that get it done? Is that good enough? So? UM,
Speaker 1: next year is going to have a lot of idiosyncratic risk.
Speaker 1: It's not lost on you that we have an election
Speaker 1: at the back end of But I need to say this.
Speaker 1: The ability of anyone in this chair to predict the
Speaker 1: next one year return is a complete random walk. If
Speaker 1: you believe in valuations, I can show you the data,
Speaker 1: whether the starting multiple is high or low. Prospective one
Speaker 1: year returns totally unpredicted. I know everyone wants to talk
Speaker 1: about the next one year. I beg folks to look
Speaker 1: a little longer. And because of the amount of pessimism
Speaker 1: that is in the market today, UM, the likelihood that
Speaker 1: that that that we enjoy attractive five to tenure returns
Speaker 1: is very high. So chance this is really important for
Speaker 1: anyone that stumbled across this channel and thought, you know, well,
Speaker 1: I'll listen to this and I'll listen to this guy
Speaker 1: talking about investing. I can't predict the next year with
Speaker 1: any accuracy. Try and predict the next five years because
Speaker 1: that's easier. Yes, that sounds counterintuitive to some people who
Speaker 1: perhaps aren't in the market with the experience that you have.
Speaker 1: Why does that make sense? It's it's all driven by
Speaker 1: my philosophy um that starting points on valuation are the
Speaker 1: most critical inputs and the more reasonable the starting point
Speaker 1: is for anyone that has a long term investment horizon, Um,
Speaker 1: the greater the likelihood that you're gonna enjoy at least
Speaker 1: average equity like returns. And I can tell you based
Speaker 1: on our work based on whether where valuations are, which
Speaker 1: I know folcusing stock prices are high. Yes, stock prices
Speaker 1: are high, but earnings growth has has more than caught
Speaker 1: up with that. For anyone that believes that has a
Speaker 1: cash flow earnings, economic profit valuation mindset, today's starting point
Speaker 1: is more than attractive for anyone that has a five
Speaker 1: to ten investment aising heart of this, this is so important.
Speaker 1: The heart of this is Johnny has a good question.
Speaker 1: They're in the blended market. You're not looking at the
Speaker 1: blended market. You're looking at what five or ten or
Speaker 1: fifteen percent of the stocks that are out there. The goal,
Speaker 1: increasingly and thankfully for the first time in ten years,
Speaker 1: has moved away from treasury yields being a put on
Speaker 1: the market to actually understanding your company's UM understanding how
Speaker 1: they're the deploy capital and the markets and the growth
Speaker 1: that they're going after. So for us, it's kind of
Speaker 1: like kids in a candy store right now because for
Speaker 1: the first time in a while, there's wide dispersion between securities,
Speaker 1: between growth and value, between large and small, and so
Speaker 1: for our job, we feel like finally, UM certainly running
Speaker 1: along short. We're playing a little golf. We playing golf
Speaker 1: with a little wind. It's Monday, nobody's listening. Give us
Speaker 1: one idea, Give us one company that needs the cantor prison,
Speaker 1: one company that needs to just give us the name.
Speaker 1: I don't know what about Brookville, ASCID Management, the real
Speaker 1: estate people, real estate infrastructure UM to buy the Montreal Canadians.
Speaker 1: They're probably not going to buy the Montreal Canadians UM,
Speaker 1: but they all about alternative assets that own scale and
Speaker 1: scope in long duration assets with inflation protection that most
Speaker 1: folks don't. Their tenure track record is spectacular and there's
Speaker 1: no reason to believe that that the next ten years
Speaker 1: wouldn't be as good per year with five year dividend growth.
Speaker 1: Charles Cantor, thank you so much, New New Burger Berman
Speaker 1: there we didn't get to Amazon will do that next time.
Speaker 1: A big week of earnings ahead. Let's bring in a guest, yeah,
Speaker 1: with Laurie Calvassin or ILLBC Caunpital Markets, head of US
Speaker 1: equity strategy. Laurie, do you find that that some people
Speaker 1: have struggled to get over Q four even twelve months later?
Speaker 1: I think, especially as we flipped the calendar into four Q,
Speaker 1: those scars, as you mentioned, run pretty deep. Um. One
Speaker 1: thing we noticed if you look back at sort of
Speaker 1: late August early September, we had that weird style rotation
Speaker 1: in the market that felt to a lot of people
Speaker 1: similar to what we had seen late last year when
Speaker 1: people were just starting to take profits on the names
Speaker 1: that had done really well. Now that's all died down,
Speaker 1: but there was a little bit if I wouldn't quite
Speaker 1: call it panic, but there was a high level of
Speaker 1: nervousness when you saw that profit taking trade happen. You
Speaker 1: think the position unwind still has more to go. What
Speaker 1: me through that? So you know, we're we're a little
Speaker 1: bit less focused on the growth value discussion right now.
Speaker 1: But in turn is of looking at sectors. You know,
Speaker 1: one area that we've really been trying to focus people
Speaker 1: has been on industrials, and we're quite simply looking at
Speaker 1: it and saying, we've been fighting the trade war here
Speaker 1: for a year and a half. You're at financial crisis
Speaker 1: lows relative to the S and p um. You know,
Speaker 1: so far earnings have been good. We'll see if that continues.
Speaker 1: But really we feel like five years down the road,
Speaker 1: we're all going to look back at this period in
Speaker 1: time and say we should have been buying the machinery
Speaker 1: stocks in the middle of the trade war. This is
Speaker 1: your big cyclicals called at the moment, right right, And
Speaker 1: I would just stress you know, we have enough nervousness
Speaker 1: of our own. We we don't like where valuations are.
Speaker 1: We have some positioning concerns. We are keeping some overweights
Speaker 1: on defensives things like reads and utilities, but we want
Speaker 1: those to be very balanced with cyclicals that we think
Speaker 1: have been de risked, like financials and industrial. Yes, so
Speaker 1: I'm looking at some of the otherweights in the large
Speaker 1: cap sectors that you like at the moment and struggle
Speaker 1: to reconcile the overwing financials with the position and utilities.
Speaker 1: Those two things walk me through why you've you're strong
Speaker 1: on one, is strong on the other. I think we
Speaker 1: think about them in terms of different time horizons. So
Speaker 1: it feels like utilities and reads are the things that
Speaker 1: we want in our portfolio for say the next six
Speaker 1: to twelve months, you know, and I would emphasize probably
Speaker 1: more of the sixth than the twelve. But when we
Speaker 1: think about things like financials and industrials, that feels more
Speaker 1: like a longer term call where we're really gonna wish
Speaker 1: we have been um when we look back in a year. Fortunately,
Speaker 1: industrials are working right now. We'll see if that last
Speaker 1: I just did October to October percent per year over
Speaker 1: the last four years, fourteen percent per year over the
Speaker 1: last three years, ten percent per year over the last
Speaker 1: two years, ten percent over the last year as well? Forward,
Speaker 1: are you gonna make double digit equity returns with the
Speaker 1: same stocks of that one year, two year, three year,
Speaker 1: four year excellence. I think when we we sort of
Speaker 1: peer into twenty and we start to think about what's
Speaker 1: to come, we feel like you're going to have a
Speaker 1: whole heck of a lot of less multiple expansion than
Speaker 1: what we've had. I mean, we've had just tremendous So
Speaker 1: what does that mean? Because you see how she goes
Speaker 1: partial differentials on a Monday, just like multiple expansion. Is
Speaker 1: it a price movement or is it an earning spool?
Speaker 1: So basically, this year we're going to have flattish earnings growth,
Speaker 1: it looks like. But we've had this tremendous move in
Speaker 1: the equity market. It's been multiplex pansion from the FED.
Speaker 1: Um the next year, we don'k you're going to get
Speaker 1: a lot less of that. We think the FED is
Speaker 1: probably going to be on pause. We're looking for about
Speaker 1: five six percent earnings growth next year, so you know,
Speaker 1: I would say less exciting than where we've been. So
Speaker 1: what's a twenty multiple stock? The price to earnings, price
Speaker 1: to cash flow is to zero? Where is that migrate
Speaker 1: to twelve months out? I think it's going to depend
Speaker 1: sector by sector. You know, I'll tell you some some
Speaker 1: of the areas where I am frankly very worried about
Speaker 1: the multiples or things like software stocks, and a lot
Speaker 1: of those are arguably Microsoft. Well I can't get into
Speaker 1: individual names, but yeah, but come on, some of these
Speaker 1: stocks are moon shots. You're telling me to sell the
Speaker 1: moon shot. Um. I don't ever want to be recommending
Speaker 1: to people that you buy things that are incredibly overvalued,
Speaker 1: incredibly over owned in Hedge fun Land at a time
Speaker 1: when we are starting to see pockets of the market
Speaker 1: factor inside what's under own, what's under owned in hegel
Speaker 1: So when we look at the industrial space, we think
Speaker 1: that one has become a lot less owned. Have you
Speaker 1: ever been to Hedge fund It's a Disney World, isn't it.
Speaker 1: You go down there and it's like a one week
Speaker 1: lacrois as campings of Disney as it is four days
Speaker 1: and you know your daughter plays lacrosse and you go
Speaker 1: to Hedge fund Land. Well, let me give you one
Speaker 1: stat on the industrials. If you look at cell side
Speaker 1: net by ratings, they are right back down to type lows. Now,
Speaker 1: I don't know what three thirteen neaps are gonna look
Speaker 1: like for three Q yet we'll have to see that
Speaker 1: jargon in the last three sentences there, what's that let's
Speaker 1: let's let's let's un what do they say, let's unwrap that?
Speaker 1: Unwrap it on cell side? What if you get cell
Speaker 1: side net by ratings? So just a gauge. So that's
Speaker 1: like the analysts and what they think. It's looking at
Speaker 1: the analysts. It's my favorite way to gauge positioning because
Speaker 1: number one, I think it aggregates what you're seeing from
Speaker 1: cell sider's, hedge funders, mutual fund investors. Everybody's kind of
Speaker 1: baked into that number in terms of what they purely feel.
Speaker 1: But we can also look at that on a daily basis,
Speaker 1: so we get a very very fresh read. You are
Speaker 1: back down to historical lows, which is in line with
Speaker 1: twenty six teen lows. That's about as washed out as
Speaker 1: anything we've seen. Consumer staples, by the way, we're right
Speaker 1: there a year ago. That was one of the reasons
Speaker 1: we liked staples last year. Let's talk about industrials a
Speaker 1: little bit more, because I know you've got to run
Speaker 1: at accoun per minutes. I'm looking at the economic data
Speaker 1: worldwide at the moment. The South Korean export data was terrible.
Speaker 1: The Japanese export data wasn't great either. The economic data
Speaker 1: still without much conviction. I don't think many people can
Speaker 1: make the argument that we've started to bottom out. I
Speaker 1: think that's a low conviction. Cool, So what do you
Speaker 1: see an industrials Apart from the valuation? Why do you
Speaker 1: see stability? Well, the other thing we've noticed, if you
Speaker 1: look at the rate of upward revision. So it's a
Speaker 1: way to gauge sentiment around earnings that's been extremely low.
Speaker 1: It's been one of the sectors where we've seen the
Speaker 1: most downward revisions coming into this reporting season. Areas like technology,
Speaker 1: consumer discretionary. You just haven't seen quite as many. And so,
Speaker 1: you know, the other thing we've been saying about the
Speaker 1: the economy and the broader outlook is if we lose
Speaker 1: this economy. Everyone already knows the manufacturing sector is weak.
Speaker 1: The consumer resiliency thesis is what's at risk. We haven't
Speaker 1: seen the downward revisions there. We don't see the washed
Speaker 1: out valuations there, we don't see the washed out sentiment there.
Speaker 1: So if we see a tipping point as opposed to
Speaker 1: a turning point out of a growth scare, we think
Speaker 1: there's more risk in areas like consumer was per all
Speaker 1: He say, well, Tom is still very bullish on the
Speaker 1: economy for next year. But you know, if you talk
Speaker 1: to him, he will tell you that the risk that
Speaker 1: we talk ourselves into a recession has risen. Um So
Speaker 1: I think he's still in the bullish camp, but he
Speaker 1: has he has tempered that a little bit. Great to
Speaker 1: see you, She used to go. She's got to go.
Speaker 1: We've gotta let it. Govley's out front. This is a joy.
Speaker 1: This is, without question, the quietest guy in New York.
Speaker 1: It is the name you don't know. You know Hurst,
Speaker 1: of course, and all that Frank Bennett has done for
Speaker 1: them in the years. His leadership at New York Presbyterian
Speaker 1: and at Lincoln Center particularly has been absolutely profound. And
Speaker 1: he has put out a book that's based on culture,
Speaker 1: which is something to talk about right now. But I
Speaker 1: have to go because I'm in the room with Paul Sweeney,
Speaker 1: who's expert on media. I gotta go to your your
Speaker 1: harsh negotiating tactics. Here. Lb j'son a Lincoln, bombing down
Speaker 1: the road with one hand, negotiating in a Lincoln out
Speaker 1: in the l b J ranch. Dick, what do you
Speaker 1: think our TV station and Austin is worth? Excuse me, Lyndon,
Speaker 1: I want to take a picture of that bowl over
Speaker 1: there later lb J. Not even want to be tonight.
Speaker 1: Follow up, Dick, do you think in Austin station would
Speaker 1: be worth as much as a Sin and Tonio station
Speaker 1: that recently sold? Is that how business has done in
Speaker 1: the insane media business? Well, business has done in so
Speaker 1: many ways. That's certainly unique. However, and it's my view
Speaker 1: that that President Johnson was not really trying to get
Speaker 1: Dick to buy the station, but he was so opposed
Speaker 1: to taking risks that that would entail that he had
Speaker 1: this little man Ox camera that he would stop every
Speaker 1: time that Johnson would try to nail him and take
Speaker 1: a picture. So yeah, but but but I mean, Paul,
Speaker 1: this goes back and this is the Maze family and
Speaker 1: everybody media to San Antonio Tech. It's all transactional. It's
Speaker 1: all transactional. Back in the day it was big media
Speaker 1: tycoon's big media personalities. And of course Frank executive vice chairman,
Speaker 1: former CEO of Hearst. And what I like about Frank
Speaker 1: and the Hearst company, Tom is it's the biggest media
Speaker 1: company that nobody's ever heard of. Um And they've owned print,
Speaker 1: they've owned broadcasting, they've owned cable TV, including this little
Speaker 1: cable network partial ownership ESPN. Frank, So give us a
Speaker 1: sense of, you know, kind of how Hearst has evolved
Speaker 1: and tried to stay on the forefront of media trends,
Speaker 1: whether it was print to broadcast to cable. How do
Speaker 1: you guys do it well. The generation of management said,
Speaker 1: I represent got handed a wonderful opportunity. The company almost
Speaker 1: Mr Hurst almost lost the company in the Great Depression.
Speaker 1: Everybody knows it was an afternoon a newspaper company. When
Speaker 1: I came to New York, we had three television stations.
Speaker 1: And when I got the opportunity to run the company
Speaker 1: beginning in nineteen seventy nine, I knew that the pivot
Speaker 1: had to be made and that electronic was the place
Speaker 1: to go. Initially, and incidentally and parenthetically, my successors will
Speaker 1: be making yet another pivot because of course the world
Speaker 1: is changing. What's the pivots too? Right now? And the
Speaker 1: kids won't run a watch one advertising. In our case,
Speaker 1: the pivot is to business media UH databases that people
Speaker 1: use every day. For example, we acquired the Fitch Radio Agency,
Speaker 1: which is one of the three largest radiators in the world.
Speaker 1: We have databases for both the medical profession and for automobiles.
Speaker 1: For example, if you have an auto wreck, God forbid,
Speaker 1: when you go into the shop, the data that's used,
Speaker 1: both parts, costs and where to get it, and the
Speaker 1: amount of labor all come out of a database that
Speaker 1: we offer. What do you think of all the young Turks.
Speaker 1: I mean, you guys used to run things on price
Speaker 1: to care slow in like actual accounting, and you try
Speaker 1: to figure out down the income statement, there would be
Speaker 1: the strange thing called profit. What do you think of
Speaker 1: these guys with the revenue growth hopefully but no profit. Well,
Speaker 1: some of them seems seem to have brought along, uh,
Speaker 1: their their investment base, their shareholders. Uh. Certainly in the
Speaker 1: case of Amazon, you have to say, what a phenomenal
Speaker 1: job he's done in his shareholders staying with him during
Speaker 1: a time where he wasn't returning a profit. Now of
Speaker 1: course he's returning a profit. I think the system that
Speaker 1: we have with public companies were earnings per share rather
Speaker 1: than cash flow or most looked at. I think they
Speaker 1: lend to that kind of an approach to business. And
Speaker 1: I happen to think, how much is going to fall
Speaker 1: out if you show should turn us upside down? I'm
Speaker 1: We're going to fall out of our pocket. Is what
Speaker 1: business is about. And so therefore there's no one that
Speaker 1: puts a heavier emphasis on cash than we do. So
Speaker 1: Frank and your career, you've seen, you know, the media
Speaker 1: landscape transition from print to electronic. As you mentioned radio
Speaker 1: TV broadcasting to cable television. Now we got this new
Speaker 1: thing called the Internet and that seems to really be
Speaker 1: changing the way people consume media and therefore the way
Speaker 1: big media companies need to distribute their media. What do
Speaker 1: I need to own? And we've seen your good friends
Speaker 1: at the Walt Disney Company really change and pivot that company,
Speaker 1: for example, to appeal to the new consumer and how
Speaker 1: media is consumed. What's the Hirst Corporation thinking about streaming
Speaker 1: and kind of embracing the Internet distributing their content. Happily,
Speaker 1: we're part of that as it relates to our ownership
Speaker 1: and ESPN right is one of the places that Disney
Speaker 1: is making that pivot. But we're also independently and with
Speaker 1: other other parts of our business putting a significant emphasis
Speaker 1: on the web and on the Internet. And it's as
Speaker 1: certain that we need to do that as it was
Speaker 1: when we needed to go electronic. I want to talk
Speaker 1: about the book. The book has leaves something on the
Speaker 1: table and it is a wonderful history out of Texas
Speaker 1: of Frank Bennick. I want to talk about culture right now.
Speaker 1: You lead with culture is everything. How do you make
Speaker 1: a culture in a rushed modern world. Well, it's all
Speaker 1: about the respect that you have for the people who
Speaker 1: work with you. That's how can you do that If
Speaker 1: they're working eight hours a week, well we don't have
Speaker 1: them working anybodus in it. That doesn't work for us. Uh.
Speaker 1: We recognize that people are entitled to have lives at
Speaker 1: their own and if management wants respect, it has to
Speaker 1: show respect to the employees. So the first principle is
Speaker 1: the company's larger than the employee. Let's build a culture
Speaker 1: where everybody is inclined to be on the same page. Now,
Speaker 1: there's no perfection, but I would argue that our culture
Speaker 1: is by far the biggest item of the success of
Speaker 1: the company. It's come from four hundred million to eleven
Speaker 1: billion dollars over on my watch. And I think that
Speaker 1: that the relationship and culture is at the heart of that.
Speaker 1: I mean, you got pretty good blurbs for your book,
Speaker 1: and think leaves something on the table only because of
Speaker 1: this blurb He's coming back Frank Bennock's about decades running
Speaker 1: a company at the center of American culture. Boy, is
Speaker 1: that true? Leaves something on the table offers valuable lessons
Speaker 1: and leadership by a great CEO and an even better storyteller.
Speaker 1: That's true too, Michael Bloomberg Bloomberg of course, Mr Bloomberg,
Speaker 1: principal owner of Bloomberg Radio and Bloomberg Television. We're gonna
Speaker 1: leave it there, Frank Benneck, thank you so much to
Speaker 1: leave something on the table. I really can't say enough
Speaker 1: about it. From a childhood in Texas and driving down
Speaker 1: country roads with lb J that with one hand on
Speaker 1: the wheel, to dealing with the American Broadcasting Company and
Speaker 1: his immense philanthropy in New York City, including tangible leadership
Speaker 1: at Lincoln Center. Thanks for listening to the Bloomberg Surveillance podcast.
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom
Speaker 1: Keene before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio.